Bluerock Homes Trust, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Dollar figures below are in millions unless stated otherwise. The company owns and operates single-family rental properties and invests in build-to-rent communities, primarily in the Sunbelt and Western U.S. At quarter-end it held 4,077 units across 17 investments; its 2,349 consolidated operating units were 94.4% occupied.
Comparability: Bluerock became an independent public company in October 2022. The 2022 comparative results are carve-out figures from its former parent, with certain expenses allocated to the business; management cautions that they are not directly comparable with standalone 2023 results.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $10.3 | $8.0 | $20.4 | $15.7 |
| Operating loss | $(3.5) | $(2.3) | $(8.4) | $(4.1) |
| Net loss | $(1.2) | $(2.2) | $(6.5) | $(3.4) |
| Net loss attributable to common stockholders | $(0.3) | $(0.1) | $(1.9) | $(0.3) |
| Net loss per common share | $(0.09) | $(0.03) | $(0.49) | $(0.07) |
| Net operating income (NOI), non-GAAP measure | $5.7 | $3.9 | $11.3 | $8.0 |
| FFO attributable to common stockholders and unit holders, non-GAAP | $2.1 | $2.9 | $0.9 | $6.1 |
| Core FFO (CFFO), non-GAAP | $5.4 | $2.8 | $10.0 | $6.6 |
Revenue and property operations: Rental and other property revenue rose 33.8% in Q2 and 40.5% in the first half, mainly reflecting portfolio growth, rent increases and operating improvements. Average rent per occupied unit increased 10.7% in Q2 and 12.5% in the first half year over year. The filing’s operating-results table reports average occupancy of 94.3% versus 91.8% in Q2 and 94.2% versus 92.2% for the first half. Property operating expenses rose 21.4% and 39.4%, respectively. NOI increased 45.8% in Q2 and 41.3% in the first half.
Profitability and margins: The company reported GAAP net losses in both periods. Q2 net loss narrowed year over year, while first-half net loss increased. Higher preferred returns from unconsolidated ventures and a $0.7 million gain on home sales contributed to other income. CFFO increased, but FFO declined; both are non-GAAP measures with company-specific calculations and should not be treated as GAAP earnings or cash available for distribution.
Cash flow and liquidity: First-half operating cash flow was $2.1 million, compared with $3.9 million in 2022. Investing activities used $6.7 million and financing activities provided $8.2 million. Cash and cash equivalents were $79.9 million, plus $6.2 million of restricted cash, at June 30. Management said available cash, operating cash flow, financing capacity and prospective capital raising should fund existing-portfolio needs for the next 12 months, but access to capital is a key dependency.
Debt: Mortgages payable were $97.5 million and revolving credit borrowings were $70.0 million, or $167.5 million in total principal debt. The DB revolving facility had $50 million drawn, approximately $17 million available subject to collateral and ratios, and matures April 2024 with two conditional one-year extension options. The ILE Sunflower facility was fully drawn at $20 million and matures December 2024. Reported facility rates were 7.96% and 8.20%, respectively. The company said it was in compliance with applicable facility covenants. Interest-rate caps and swaps cover $94.1 million of debt.
Material developments, outlook and risks
- The company sold nine homes in Q2 for approximately $2.8 million gross, generating $2.7 million net proceeds and a $0.7 million gain. It acquired 18 Savannah units for approximately $4.2 million and bought out partners’ interests in two investments.
- Preferred equity investments totaled $86.2 million net at quarter-end. Preferred returns were $2.9 million for Q2 and $5.7 million for the first half; a substantial portion was accrued rather than received in cash. A Peak REIT OP investment was partially redeemed for $7.2 million, including principal and accrued return.
- Management expects results from the existing portfolio to improve with future investments and acquisitions, but gave no specific earnings or operating guidance. Development and lease-up timing, costs and occupancy remain important execution factors. Several preferred-equity-backed communities were still in lease-up or development.
- A registration statement became effective for a continuous offering of up to $500 million of 6.0% Series A Redeemable Preferred Stock. This is offering capacity, not evidence that the full amount was raised. The company reported no distributions declared or paid during the first half; its board determines future distributions.
- Risks highlighted include inflation and rising interest rates, higher operating and construction costs, tighter credit availability, tenant payment and retention, leasing demand, housing oversupply, regulation, REIT qualification and the ability to refinance or raise capital. The company noted that failure to redeem preferred equity investments when due, or insufficient project cash flow, could affect earnings and cash flows.
- Related-party management fees were $3.9 million for the first half under the external management agreement; there was no incentive fee expense in either Q1 or Q2. Management reported effective disclosure controls and no material change in internal control over financial reporting. No material legal proceedings were reported.
Important facts for investors to verify
- Cash conversion and collection of preferred returns: compare reported preferred-return income with cash distributions received, and monitor accrued balances and project redemptions.
- Funding and refinancing: confirm actual proceeds from the Series A offering, remaining revolver availability, covenant compliance and plans for 2024 facility maturities.
- Development execution: track lease-up, occupancy, construction costs and completion dates across the preferred-equity portfolio.
- Standalone cost trends and related-party fees: assess whether property revenue growth continues to cover operating costs, management fees and interest expense.
- Period comparisons: interpret 2022 results cautiously because they are carve-out, pre-spin-off figures rather than standalone company results.